Spot Gold extended gains to an almost three-week high of $4,149.10/oz. on Tuesday on expectations of another interest rate cut by the Federal Reserve and as market players eyed a potential end to the US government shutdown.
Yesterday the US Senate passed a deal that would restore federal funding and put an end to the longest-ever government shutdown. The latter has delayed the release of essential macro data, which complicated assessments of the US economy’s state, as investors had to rely on secondary, non-government data prints.
“The idea that the shutdown is ending was really more met as lifting a level of uncertainty that gave markets permission to reengage with what has been one of the main speculative narratives this year,” Ilya Spivak, head of global macro at Tastylive was quoted as saying by Reuters.
“The bias for the rest of the year is at this point favoring the upside still. At this point, the path of least resistance for gold is back to October’s high, and then we might be heading higher thereafter.”
A government reopening will provide more clarity on the US economic outlook and the Federal Reserve’s policy path.
Markets are now pricing in about a 63% chance of a 25 basis point Fed rate cut in December, compared to a 68% chance a week earlier.
Spot Gold was last up 0.48% on the day to trade at $4,135.14 per troy ounce.
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